EGShares India Small Cap ETF (SCIN)

India's largest private-bank ICICI Bank (IBN-4.5%) reported FQ3 profit short of expectations after gross non-performing assets rose 35 basis points from a year ago to 3.4%. Net non-performing assets rose 18 bps from last quarter and 33 bps from a year ago to 1.27%.

A volatile session in India saw the Sensex close up 0.9% to an all-time high following the election victory by the opposition Bharatiya Janata Party and its prime minster candidate Narendra Modi. Stocks initially rose more than 6% as results came in, but "sell the news" action took over, given the Sensex's already big run in the weeks leading up to the election.

Indian shares and the rupee continue to rise as polling booths close in the world's largest election following weeks of voting.

Results are due on Friday, with the business-friendly Bharatiya Janata Party, led by Narendra Modi, expected to win handsomely. Shares could climb further if he gets anywhere near or above the 272 seats required for a majority in parliament.

"The markets are expecting the BJP-led alliance will get around 230-240 seats and anything above that will be a bonus," says investment officer David Pezarkar.

However, should Modi win, he will inherit a high-inflation economy suffering its worst slowdown since the 1980s, with GDP growth almost halving to under 5% over the previous two years. It has been Modi's pledges to fix the economy that have made him the frontrunner in the election.

The Sensex stock index is +1.9%, while the USD-INR is -0.2% to 59.733 rupees.

Investors are placing bets ahead of next week's election results which are expected to show a win for the opposition party's Narendra Modi and the worst-ever defeat for the ruling Congress Party amid a wave of graft scandals, rising inflation, and slowing growth.

The Sensex - up 2.9% last night - is ahead by 17% since the opposition BJP party named Modi as its PM candidate last September.

A check of Asian emerging markets overnight following the FOMC and Yellen suggesting the first hike in rates in maybe one year finds them lower, but not out of line with the rest of the global selloff.

India had a relief rally on Wednesday after the RBi surprised by not hiking rates, but fell anew last night - dropping 0.7% for its 7th decline in 8 sessions.

Leading among the blue chips were the rate-sensitive stocks, with ICICI (IBN) Bank off 3% and HDFC (HDB) Bank down 2.1%.

"One of the big questions post Fed's move is whether liquidity will continue flowing to emerging markets like India or not. If rates go up in U.S. then it will be risk for EMs," says Aneesh Srivastava, CIO at IDBI Federal Life Insurance.

The Asian Development Bank revises down its growth forecast for developing Asia to 6% in 2013 (from 6.6%) and 6.2% in 2014 (from 6.7%).

India suffers the largest downward revision, with the ADB now predicting economic growth of 4.7% this year versus its previous estimate of 6%. China's forecast is haircut slightly, to 7.6% from 7.4%, although the country's slowdown is described as "healthy" and "intentional," and the bank's chief economist still expects China's economy to grow at a 7% clip over the next 10 years. Chinese and Indian markets are closed for holidays.

Meanwhile, economists' rosy outlook for the Philippine economic machine is intact, as the ADB now sees the country's economy growing at a 7% pace in 2013 (from a previous forecast of 6%) and 6.1% in 2014 (from a previous forecast of 5.9%). The Philippine economy has expanded at a 7% pace for four-straight quarters. The PSEi rallied on the news, rising 2.7% in Manila.

In its first decision under new governor Raghuram Rajan, the Reserve Bank of India has surprisingly increased its benchmark lending rate to 7.5% from 7.25%, saying that "bringing down inflation to more tolerable levels" warranted increasing the LAF repo rate.

Analysts had expected the RBI to leave the rate as it was.

The central bank also started to reverse recent measures it took to calm volatility in the forex market, lowering the marginal standing facility rate by 75 bps to 9.5%.

The RBI's actions rocks shares, with the Sensex -2.5% after being -0.2% prior to the decision. The rupee plunges briefly before stabilizing somewhat and the USD-INR is now +0.3% at 62.38 (PR)

As expected, emerging market stocks post big gains on the back of the Fed's decision to keep the size of its asset purchase program unchanged for the time being.

Indonesian shares rose as much as 7.4% in early action before retreating a bit to trade around 4% higher. Stocks likewise rallied sharply in India (+3%), Thailand (+3%), the Philippines (+2.8%), Malaysia (+1%), and Turkey (+6.2%).

For a second straight day, Indian stocks rise sharply — Sensex +2.2% — with banks leading the way, as new RBI governor Raghuram Rajan has apparently managed to instill some confidence in the market. (previous)

In addition to the creation of inflation indexed savings certificates and the issuance of long-awaited new banking licenses, Rajan will open FX swap lines between banks and the RBI (see diagram) a move BofA says may boost the country's flagging reserves by $10B.

"This is exactly what the market wanted to hear," one Mumbai-based banker says. Apparently so — shares of India's largest lender HDFC Bank (HDB+7.1%) rose 8% Thursday, fueling what Bloomberg says was the largest rally in the S&P BSE India Bankex index in four years.

The Sensex broke a 3-day winning streak, tumbling 3.5% as the rupee fell as much as 2% amid worries India is set to be downgraded. An S&P report says the chances of an Indian downgraded are higher than those for Indonesia.

Goldman cuts its fiscal year GDP growth forecast to 4% from 6%, and now expects the rupee to fall as low as 72 to the dollar in the next 6 months. It takes just more than 67 rupees to buy a greenback at the moment.

IBN's 2.8% premarket decline comes on the heels of yesterday's 5.7% dive and a 41% fall YTD. The rupee is having its worst session in decades, off nearly 4% vs. the greenback. The Sensex however, managed to reverse a sizable early loss to close slightly in the green.

The rupee's collapse shows no sign of abating, with India's currency hitting yet another record low of 68.71 to the dollar. The USD-INR is now +2.9% at 68.225, while shares are down again, dropping 1.1%.

"It is just impossible to put any realistic value to the rupee any more," says forex dealer Uday Bhatt.

Foreign investors are fleeing the country, selling almost $1B of shares in the eight session through yesterday, although net purchases for 2013 are $12B. Bond outflows this year are $4.5B.

Complicating matters for India is that the prices of gold and oil, its biggest imports, are surging this week due to the tension with Syria.

The rupee's slide comes despite the government taking measures to try to stem the tide. The latest proposal is to create swap agreements with other countries to reduce demand for foreign currencies.

The collapse in the rupee is causing havoc with companies such as Whirlpool of India (WHR), as the trend is boosting import costs at the same time that consumer spending is falling.

India's rupee has dropped to more record lows against the dollar and shares have plunged after the country's Lower House of Parliament approved a $20B plan to provide cheap grain for the poor, or almost 70% of the country's 1.2B people.

The bill has prompted concerns that it will add to India's fiscal deficit.

The USD-INR is +2.3% to 65.805 after earlier hitting 65.93. The currency has plummeted this year for a variety of reasons, including the lack of economic reform and the the Fed's intention to start tapering its QE program.

The EGShares India Small Cap Exchange Traded Fund (ETF) seeks investment results that generally correspond (before fees and expenses) to the price and yield performance of the Indxx India Small Cap Index. The index is a free-float market capitalization weighted stock market index comprised of a representative sample of 75 Indian companies that Indxx, LLC determines to be the representative of small market cap companies in India.
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